City are without Bernardo Silva and Ilkay Gundogan for Tuesday's clash at the Groupama Stadium, while Kevin De Bruyne is also sidelined.
Foden has only played three minutes in the Champions League so far this season but has made seven substitute appearances in the Premier League.
And Guardiola said the 18-year-old is ready to play a part against Lyon should he be required by City, who are top of Group F, three points clear of the Ligue 1 side.
"When Phil appeared in the last pre-season [game], I was so impressed and he's now stronger and able to play with us - without a doubt," Guardiola told a news conference.
"He plays so aggressively with the ball and without, he is so intense. Every time he plays, he is so good.
"That's why he is ready. He is part of the squad."
Gabriel Jesus has also not travelled with the rest of the City squad but Guardiola confirmed the Brazil striker's injury is not serious.
"Bernardo is in the last step before being fit," the Catalan added.
"Gabriel had had a muscular problem in training but isn't ready.
"Gundogan had a problem in his feet.
"I prefer to have all the squad to choose [from] but it is what it is. We have to adapt with the guys that are here and we will try to do a good job and the others who aren't here will do their best to recover."
PEP: Tomorrow is a big chance to be in Europe in February. We lost one game and bounced back; we reacted so well but the job is not over. We have to win one more and hopefully, we can close the group stage. #olvcity— Manchester City (@ManCity) November 26, 2018
A draw would seal City's progress but they lost at home to Lyon earlier in the group stage, the only time Guardiola's men have been beaten in any competition since April.
"When you lose the first game at home, the group stage becomes so tough," Guardiola said. "We did our job, winning the next three games. We were lucky that the opponents didn't win.
"We tried to avoid arriving in the last game demanding to qualify. That's why tomorrow is the big chance to go through to the knockouts.
"For some people, if we don't win the Champions League then we have failed, but for fans - they love watching the team. But, of course, we want to qualify and arrive in the best conditions possible. If we are lucky to go forward in the competition then that speaks for itself."